|6 Months Ended|
Dec. 31, 2016
|Business Combinations [Abstract]|
Note (3) – Acquisition: The Western State Design Acquisition was effected in accordance with the Asset Purchase Agreement between the parties dated September 7, 2016 (the “Asset Purchase Agreement”), pursuant to which the Company, indirectly through Western State Design, purchased substantially all of the assets of WSD for a purchase price consisting of approximately $18.5 million in cash(the “Cash Consideration”) and 2,044,990 shares of the Company’s common stock (the “Stock Consideration”). At the closing of the Western State Design Acquisition, the Company paid the $18,500,000 of Cash Consideration, of which $2,800,000 was deposited in an escrow account for no less than 18 months after the Closing Date (subject to extension in certain circumstances) and issued 1,656,486 shares of the Stock Consideration. The issuance of the remaining 388,504 shares of the Stock Consideration required stockholder approval under the rules of the NYSE MKT, which was obtained at the Company’s Annual Meeting of Stockholders held on November 30, 2016. Such shares were issued during the third quarter ended March 31, 2017. Cash Consideration paid on the Closing Date was financed through $12.5 million of borrowings under a Credit Facility (as defined below) entered into on October 7, 2016 (see Note 5) and $6.0 million of proceeds from the issuance of 1,290,323 shares of the Company’s common stock in connection with a Private Placement Transaction (as defined below), which was completed on the Closing Date (see Note 7). Fees and expenses related to the Western State Design Acquisition, consisting primarily of legal and other professional fees, totaled approximately $478,000 and are classified as selling, general and administrative expenses in the Company’s condensed consolidated statements of operations for the three and six months ended December 31, 2016. Pursuant to the Asset Purchase Agreement, the Company indirectly, through Western State Design, also assumed certain of the liabilities of WSD. The total purchase price for accounting purposes was $34.6 million, which included cash acquired of $5.1 million.
The Western State Design Acquisition was treated for accounting purposes as a purchase of WSD using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Under the acquisition method of accounting, the aggregate consideration in the Western State Design Acquisition will be allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the Closing Date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to intangible assets and goodwill. The computation of purchase price consideration and the preliminary allocation of consideration to the net assets acquired are presented in the following tables (in thousands):
(a)Includes $18.5 million paid at closing (inclusive of a preliminary working capital adjustment) and an estimated post-closing working capital adjustment of $156,000 net of $5.1 million of cash acquired.
(b)Calculated as 2,044,990 shares of common stock, multiplied by $7.85, the closing price of the Company’s common stock on the Closing Date.
The purchase price allocation reflects preliminary fair value estimates based on preliminary work and analyses performed by management and is subject to change as additional information to assist in determining the fair value of net assets acquired at the Closing Date is obtained during the one year post-closing measurement period.
Intangible assets consist of $2.4 million allocated to the Western State Design trade name, $3.6 million allocated to customer-related intangible assets and $0.4 million allocated to covenants not to compete. The Western State Design trade name is indefinite-lived and therefore not subject to amortization. The Western State Design trade name will be evaluated for impairment annually or more frequently when an event occurs or circumstances change that indicate it may be impaired, by comparing its fair value to its carrying amount to determine if a write-down to fair value is required. Customer-related intangible assets and covenants not compete will be amortized over 10 years and 5 years, respectively.
Goodwill is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforce acquired, as well as benefits from the increased scale of the Company as a result of the Western State Design Acquisition.
Supplemental Pro Forma Results of Operations
The following unaudited supplemental pro forma information presents the results of operations of the Company, after giving effect to the Western State Design Acquisition, as if the Company had completed the Western State Design Acquisition and related financing transactions on July 1, 2015, but using the preliminary estimates of the fair values of the assets acquired and liabilities assumed as of the Closing Date. These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the Company would have been if the Western State Design Acquisition had occurred on the date assumed, nor are they indicative of future results of operations.
The unaudited supplemental pro forma net income for the six months ended December 31, 2015 was adjusted to include $868,000 of transaction costs.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://www.xbrl.org/2003/role/presentationRef